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Practice Management > Marketing and Communications > Client Retention

Few RIAs Using Testimonials, Reviews: Study

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What You Need to Know

  • Over 64% of RIAs failed to complete Form ADV Item 5.L, which would give them previously prohibited marketing opportunities.
  • Only 2.3% of firms that completed Item 5.L use testimonials.
  • Third-party ratings and reviews will spur the emergence of wealth tech platforms that serve the needs of investors and advisors alike, according to Indyfin.

Some 14,000 RIAs filed a Form ADV amendment with the Securities and Exchange Commission as of March, but 64% of them failed to complete Item 5.L., which would enable them to leverage new marketing opportunities under the new marketing rule, the fintech company Indyfin reported Tuesday.

This demonstrates that the industry is unprepared for the November deadline for compliance, it said.

“What our research has shown is that there is still uncertainty and confusion within firms on how to best utilize the provisions of the rule to best position their firms for growth,” Indyfin’s founder, Akshay Singh, said in a statement.

“The new SEC marketing rule is a once-in-a-generation chance to differentiate themselves and to modernize how advisors can market their firms, particularly when it comes to digital channels, one of the fastest-growing channels available.”

Opportunities Go Begging

Indyfin’s research found that only 2.3% of firms that completed the ADV Item 5.L. use testimonials, even though testimonials are now available for use. Testimonials enable an advisor’s clients to share how the firm is meeting their needs and why they love working with it.

For many other service industries, client testimonials provide the social proof needed to make purchase and partnership decisions, Indyfin said.

In addition, just 2.1% of RIAs in the study that have completed Item 5.L. reported that they use endorsements in marketing their business.

Endorsements are a provision of the SEC’s new marketing rule whereby parties other than clients can review an advisor — a huge opportunity for advisors to differentiate their firms, Indyfin said.

This classification includes former clients and other professional associations, such as accountants, lawyers and relevant promoters of an advisor’s business.

Upside of Reviews

The study discovered that 9.2% of advisory firms that have completed ADV Item 5.L. have already begun to use third-party reviews on platforms that offer unbiased perspectives. Indyfin noted that within the provisions of the new regulations, rating organizations must structure surveys to elicit clients’ positive and negative responses.

It said that of the provisions not previously available, this aspect of the new marketing rule has gained the most traction and presents a clear opportunity that should be executed in advance of the November deadline.

Indyfin said this finding suggests that adoption of third-party ratings and reviews will spur the emergence of wealth tech platforms dedicated to serving the needs of investors and advisors alike.

These will be similar to how other platforms for ride-hailing, lodging and local businesses that have built trust online and provided consumers the confidence to digitally find and select the services they are looking for.

“The future of wealth management marketing is here and while many have held the wait-and-see mentality, they will likely find themselves scrambling in the third quarter,” Singh said.

“There is urgency here, the clock is ticking and firms as well as their compliance teams should act now, where there is a clear opportunity to earn a first movers advantage in using the new rule to grow their firms.”


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